Forecast Q2 deducted 0.95 billion yuan from non-performance centers, down 26% from the previous month, which was greatly affected by coal prices and costs. The company released an interim results forecast. In the first half of the year, it is expected to achieve net profit attributable to mother of 2.05-2.35 billion yuan, a year-on-year decrease of 55.6%-61.3%; net profit not attributable to mother was 2.08-2.38 billion yuan, a year-on-year decrease of 54.8%-60.5%. The large decline in performance was mainly affected by the following factors: first, due to coal mine safety supervision and production links, production and sales of coal products decreased year-on-year in the first half of the year; second, due to the impact of the coal price cycle, commercial coal prices fell year on year; third, due to factors such as resource tax rate adjustments, calculation of safety costs for some mines, and changes in rental fees, etc., the cost of products increased year-on-year. Among them, Q2 is expected to achieve net profit to mother of 0.76-1.06 billion yuan, a year-on-year decrease of 44.6%-60.2% and a year-on-month decrease of 17.5%-40.8%; net profit without return to mother of 0.8-1.1 billion yuan, a year-on-year decrease of 42.7-58.4%, and a year-on-year decrease of 14.7%-38.1%.

Q2 Raw coal production was +9% month-on-month, and the year-on-year growth rate of production in June was positive. According to the company's operating data announcement, raw coal production in the first half of the year was 27.67 million tons (-6.3% YoY), and commercial coal sales were 24.55 million tons (-10.0% YoY). Among them, Q2 raw coal production was 14.43 million tons, -2.8% YoY, +9.0% (June output +6% YoY); commercial coal sales were 12.74 million tons, -12.6% YoY, +7.9%. According to Wind, the average price of coal injection trucks in Lucheng since July is 1,160 yuan/ton, a slight increase from Q2. The sharp rise in volume and price combined with cost control is expected to drive the company's performance improvement.

Profit forecasting and investment advice. The company is a leader in the coal injection industry. It has been continuously rated as a high-tech enterprise among domestic coal companies, and enjoys preferential income tax rates. The company's coal mines account for a high proportion of advanced production capacity, and its profitability is at the forefront of coal companies in Shanxi. The scale of the company's coal production capacity and resource reserves are expected to continue to grow in the medium to long term. In the company's coal sales structure, coal accounts for a relatively high share of the market, and performance flexibility is high. According to the company's financial report, the company's interest-bearing debt has fallen to a low level. By the end of the first quarter, the company's undistributed profits and special reserves reached 34.3 billion yuan and 7.8 billion yuan, and its dividend capacity is strong. The company's actual dividend ratio for both year 22 and 23 was 60%. EPS is expected to be 1.61, 1.77, and 1.86 yuan/share in 2024-26, respectively. Referring to comparable companies, the company will be given 11 times PE in 24 years, corresponding to a reasonable value of 17.69 yuan/share, maintaining a “buy” rating.

Risk warning. Downstream demand growth is low, coal prices have fallen beyond expectations, cost control is weak, etc.